The idea is simple. Payday loans are better than tax refund loans because you know where your money is going with a payday loan. There’s no gray area like there is with the tax refund loan because you’re dealing with concrete numbers from a direct payday lender and your paycheck. There’s no guesswork with a payday loan. Read the rest of this entry »
MADISON, Wisc. (Sept. 13th, 2010)- On July 21st 2010 Obama signed the Dodd-Frank bill which proposed the creation of a new consumer financial protection agency which eventually was approved as the Bureau of Consumer Financial Protection (“BCFP”) to oversee and regulate virtually all forms of consumer credit including direct online payday lenders such as Cash USA.
Speculations on the actual effects of this new Bureau to the payday lending industry have been widely debated amongst many media outlets. Despite any inconsistencies in theories, the vast majority of writers seem to agree that the BCFP will certainly deliver a strong blow to the payday lending industry, which has already seen an increase in regulations over the past decade.
Recently, attorney Hilary B. Miller released an article to the payday loan industry blog, a payday loan industry news source, discussing the more realistic implications of this new Bureau and any new regulations for payday lenders.
Surprisingly, despite the media’s early celebration of the demise of the payday lending industry, Mr. Hilary B. Miller projects quite a different future along with his professional opinion and speculation as to why the BCFP may not be quite the threat to payday advance lending that everyone else is predicting.
For example, Mr. Miller makes the observation that, of the 848 page bill there is not a substantive regulation of payday loan and cash advance lending business. Although he does go on to mention “Title X” and the broad reaching power with regulates and enforces “covered persons”, which includes payday lenders. It seems that the real power of the BCRP may lie not only in the specific regulations, but also in the “vague” and vast power of Title X of the Dodd-Frank Bill.
Mr. Miller also surmises that Staff members may in fact be an integral part of the new BCFP, stating that their primary motivation is to “get it right” and that staff members are the “unsung heroes of Washington” whom also “understand science” and “don’t care about getting votes”. If Miller is correct, these objective staff members, who he predicts will make decisions based on science and unbiased research, as opposed to the popular Center for Responsible Lending reports that seemingly distort or leave out any facts that don not paint Lenders in a negative light.
If Mr. Miller is in fact correct, it would be a welcome change to payday lenders everywhere. To date, the majority of regulatory changes overseeing maximum APR’s and fees have been run similar to a “smear” campaign, often times distorting facts and figures. A common practice from opponents of payday lenders is to simply regurgitate the same arguments such as “payday lenders ‘target’ low income families” yet they never seem to acknowledge that like any other private business, or that by limiting APR’s to 36% lenders are only able to charge $1.38 for a $100 loan, thus making it impossible to stay in business.
Hopefully, for both the sake of consumer financial freedom of choice, and the freedom to operate small businesses within the reasonable regulations of the law, Mr. Miller’s predictions will hold true over the next year whilst the BCFP begins to grasp the reigns and oversee the vast financial landscape of America.
Last month, Montana’s Supreme Court said that it would not block the Initiative that would put a cap on payday loans.
But due to a language change that was different from the original petition, the proponents of payday loans are now asking the district judge to void the Initiative because the voters saw different version of the initiative when they signed it.
Montana Secretary of State claims that they have sent notices of the revision to 56 counties informing voters and clarifying the new language.
MADISON, Wisc. (Sept. 9th, 2010) – In response to a recent statement from the Better Business Bureau which warns potential payday loan borrowers of the possible dangers of procuring an online loan from un-licensed lenders, reputable and licensed online paydayloanjr.com has released the following guidelines to help assist potential borrowers in their search to find safe online payday loans. There are many trusted and safe cash advance sites on the internet today, but knowing what to look for when searching for an internet loan can prove to be the best method of avoiding possible encounters with unscrupulous lenders.
Some Considerations and Guidelines for Selecting a Trusted Online Lender:
Know where you found the lender from – Many of the customers who have complained against, or have had problems with online lenders, don’t really know where they had found the lender from. Always beware of how you got to a lender’s site. For example, if you have found them on the 1st page of a Google search of “online payday lender” chances are that they are a reputable and licensed lender.
Is the lender licensed? – If the online lender is a direct and licensed lender, meaning that they are directly lending you cash and are also officially licensed by the State, you should have leverage if you ever have a real problem with the lender. To be certain, you can always ask for the lender’s license number (usually listed on their site) and verify against the State’s database. This really doesn’t take long to do, and will ensure that you are in fact working with a safe and licensed lender.
Beware “Lead Generation” sites – Any websites claiming to “find you the cheapest loan available” through their “vast database of lenders” (or something similar) should be considered an immediate “red-flag”. Of course, not all of these lead generation sites (meaning they do not directly lend any money, they are only selling your information to a lender) will result in a problem with your loan, but since they are not directly lending you money, it can be difficult to find contact info for your actual lender. In our experience, it is best to stick with a direct lender.
Contact customer service – Make sure that customer service exists, and is there to service you if you ever have a question or issue. Sites that are attempting to “scam” you, will generally not have a customer service center that you can contact, and in place will have an email contact only. If you are taking out a payday loan and giving out personal info over the internet, you will want to have access to an actual customer service representative.
As a direct and trusted online direct lender, paydayloanjr.com strives to provide their customers with the information and knowledge to find a safe and secure loan when needed, and also to know when a short-term loan can actually help a financial situation and also situations in which a short-term loan solution should be avoided.
Due to a recent flood of complaints in the State of Illinois from payday lending customers being contacted and asked for bank account information, both the State Attorney General Lisa Madigan and payday lenders alike are issuing warnings to payday loan customers. It seems that several payday loan customers have been contacted by a fake “collections” company asking customer’s about their payday loan debt and ultimately attempting to get the customer’s account number. Papdayloanjr, a direct online lender that cares about the privacy of their customer’s personal finance information, is issuing this press release as a warning in hopes of helping to put a stop to this scam.
The Illinois Attorney General’s office on August 25th, 2010 issues an official statement warning consumers in the State of Illinois about the recent wave of fake collections calls, and offered residents some tips for handling a potential scam call. She reminded those receiving a suspicious call that, contrary to what you may be told, a payday loan customer CANNOT actually go to jail for not paying off a debt in time. She advised those threatened by a potential debt collector to hang up the phone and file an official complaint with the Attorney General’s office (www.illinoisattorneygeneral.gov) OR by calling the AG’s Consumer Fraud Hotline at 1 800 386-5438 for the Chicago area) to assist in putting these practice to a halt.
And although the State of Illinois’ warning was issued just days ago, Paydayloanjr.com had already issued a warning to customers on their payday loan blog. As a direct lender who promotes responsible lending practices, it is crucial to step in and provide customers with the information necessary to help avoid any scams targeting payday loan customers.
It seems that Illinois isn’t the only State with reports of these fraudulent collection calls. There have been reports of the same tactics being used against payday loan customers in Colorado, Ohio, Florida and Indiana as well. Although at the moment the majority of complaints are from customers in Illinois, and no other State’s at this time have issued an official warning to consumers.
The “false” collectors have reportedly used several names, most are false and the business does not actually exist, but the scammers have also used names of actual legitimate businesses such as Cash Net USA and Quick Cash. Cash USA has also released a statement letting customers know that they had nothing to do with the scams, and their name was most likely used in order to make the collectors sound more legitimate, thus increasing the chances of fooling a customer into authorizing a payment.
If you receive any calls such as described please contact your State’s Attorney General’s office to report the complaint. We hope to see the persons responsible brought to justice swiftly, before any more consumers are harassed or taken advantage of. Payday loan customers can always find helpful tips about this and other topics and info at our Paydayloanjr blog page as well.
According to About Payday Loan, recently in Colorado, House Bill 1351 was passed in an attempt to limit APR’s for payday loans in Colorado, but critics from both sides are now questioning the true implications of HB 1351 for both consumers and payday lenders. The new law, which went into effect earlier this month, was meant to eliminate payday loans and replace them with a 6 month installment loan instead. The Community Financial Services Association, which represents the payday lending industry in America, stated that the new bill will result in “the closing of dozens of payday loan stores and the loss of at least 100 full-time jobs” and will also affect direct internet lenders such as Cash USA possibly causing them to no longer continue to offer loans in the State of Colorado.
Those in the payday lending industry, which reportedly lends to 300,000 customers a year in Colorado alone, are attempting to create a business model that may indeed allow them to survive amidst these drastic regulatory changes to their already transparent financial product, several payday loan storefronts have shut their doors leaving many seeking employment. Many lenders preemptively closed down knowing only of HB-1351 via payday loan news sources such as the payday advance forum.
Despite the original intent to lengthen the required term of these small loans in order to cut down APR’s, new studies argue that within the limits of the new laws would actually allow lenders to increase APR’s with the new 6 month loan, by use of new finance charges. These claims do not, however, seem to specify exactly what terms are being compared to come to this conclusion, nor do they specify what provisions of HB-1351 actually restrict or allow these practices. And because APR’s by nature can vary greatly on short term loans, this may be yet another attempt by regulators and those opposed to the payday lending industry to use deceptive APR statistics to “mis-represent” or distort figures. For example, a common claim is that APR’s should be limited to no more that 36%, and that “everyone knows” an APR of 400% is simply “too much”, when in reality a $29 overdraft fee (2 week period) would calculate to an APR of 755%, which is legal and widely accepted as a standard even for overdrafting less than a dollar.
HB-1351 also requires payday lenders to refer customers to another lender if they do not offer the repayment options that the customer wants, which is a bit alarming to lenders when considering both the rather vague nature of the regulation, and the fact that seemingly no other industry is required to adhere to such a policy. If a restaurant cannot prepare your favorite meal, you are certainly not guaranteed by law a referral to a restaurant that can cater to your request.
In any case, many payday lending jobs in Colorado have already been lost, and consumers that only need a little cash until payday will now only be able to select a 6 month loan. And although this may not seem to make sense, it is intended to “protect” consumers in Colorado. At least the details of this bill are still currently being drafted by the Attorney General’s office, and a final hearing is scheduled for next Tuesday. Perhaps both lenders and consumers will see some positive changes at that time.
With new reforms and regulations happening in the financial world, many payday lenders are looking into offering alternative types of loans that are beyond payday loans.
Some of these alternatives maybe installment loans, title loans, or small business loans.
Installment Loans: Installment loans are very similar to payday loans except that you have an option to pay back the loan in smaller portions on your future paydays until you have paid off your loan. This will help you reduce the stress of paying a big portion of your paycheck to repay your loans. The disadvantage of such loans are that you may end up paying more fees because since you don’t pay off your debt on time, the fees could roll over and you end up paying a lot more than you borrowed.
Title Loans: A title loan also referred to as auto title loan or simply car title loan, are the types of loans that are borrowed based on borrowers vehicles as collateral. These loans are a bit cheaper than payday loans but risk is that you may lose your car if you don’t pay.
Small Business Quick Loans: Smarter lenders like Cash USA are now looking into offering quick small loans to small business. This is an interesting concept because although small businesses made up half of US economy but majority of small businesses have hard getting loans from banks specially post credit crunch. So concept of lending to local small businesses could be an interesting idea.
Payday Lenders such as Payday Loan Trust, will have to wait until November in order to see if their right to offer payday loans to the citizens of Montana will become “regulated out of business”, some lenders argue. The term “payday loan” describes a short-term loan, between the range of $100-$1,500 (averaging about $300), that is typically set to be re-paid on the borrower’s next paycheck date. These loans are, in majority, utilized by middle class Americans that find themselves in a temporary financial pinch until their next payday and cannot find access to short-term credit anywhere else. But come this November residents of Montana may see their right to choose payday loans eliminated if initiative I-164 is passed, which would eliminate hundreds of jobs in Montana when lenders such as Pay1Day stop offering cash advance loans in Montana.
The initiative will cap the maximum allowable APR to a mere 36%, meaning lenders could only charge $1.38 for each $100 loaned for a 2-week period. And because the majority of payday loan borrowers have bad credit, they are a higher risk meaning that after licensing, operations costs and customer defaults, the 36% APR would not come close to covering expenses.
Legislative movement such as I-164 in Montana has many in the payday loan keeping a close eye on payday loan news developments, not only in Montana but across the entire country. Even for direct online lenders such as Pay1Day, who loan directly to borrowers via their secure online applications, there are strict penalties for lending to borrowers that reside in States that have banned these loans or placed harsh APR’s restrictions. Staying one step ahead of these changes is crucial in a fast changing industry such as payday lending.
Unfortunately for thousands of Americans this government “over” regulation and elimination of consumer choice has done little to better the average payday loan customer’s financial situation, as well as eliminated thousands of jobs. Any legitimate complaints against the payday lending industry could easily be resolved with just minor regulations, such as limiting or eliminating “rollovers” of loans, which can make it tougher to pay off the loan principle. Instead, consumers are left with literally no other option for credit, and turn to un-regulated and often times unscrupulous online lenders.
Unlike reputable and responsible direct lenders, these “other” sites are the source of the vast majority of complaints against the payday lending industry. Typically they are not even lenders, and simply “sell” your personal application info off to lenders, making it nearly impossible to contact a representative if perhaps you never receive your money yet still are charged an “auto payment” for re-payment of a loan you never actually received.
We as consumers and lenders can only hope that this Montana initiative will be voted down, to save jobs and protect the consumer’s right to choose. After all, payday loans are already fully regulated, and every detail is disclosed. I wish I could say that for every other financial product.
Recently in Colorado House Bill 1351 passed which caps APR’s for Payday Loans at a mere 45%, which effectively eliminates the possibility of offering payday loans at a rate that would even merely cover operating expenses, let alone account for the relatively high number of customers that default on these loans. For payday lenders, even direct internet lenders such as Payday Loan Trust, this means they will no longer continue to offer these short-term loans to residents in Colorado.
Typically payday loan customers are short on cash between paychecks and just need a little extra to get by until their next paycheck, many of whom have a less than perfect credit score and have literally no other options for short-term credit during these times. And although payday loans are a tightly regulated and fully disclosed financial product, these customers in Colorado will no longer have the freedom to choose a short-term loan when they decide it may help. Now, the payday loan option will be replaced by “installment” loans of $500 at a period of 6 months.
Many fear that by replacing payday advance loans with the new 6 month installment loans, borrowers in the State of Colorado may actually be negatively affected by the change in financial products. After all, it is hard to fathom why a 6 month loan would be any more helpful when you only need a little cash for a car repair, or until payday. But regardless of the outcome or implications of these new installment loans, most lenders have already closed their doors and stopped lending in Colorado permanently.
Payday Loan Trust, which prides itself on being a reputable trusted direct online payday lender and an advocate of education both customers and industry professionals about the true benefits and drawbacks of payday lending, has already stopped offering internet payday loans to Colorado residents in response to the new bill.
Unfortunately for customers in Colorado, as demonstrated in other States that have already banned or passed APR restrictions on paycheck loans, many of them may un-knowingly turn to un-licensed lenders on the internet. In states such as Georgia and South Carolina that have banned payday lending, the number of complaints against lenders increased drastically AFTER payday lending was shut down in the State. This is largely due to the fact that the demand for access to credit does not simply “disappear” along with the banned loan options, and many customers turn to “un-regulated” lenders online, which leads to more problems and complaints as opposed to customers with access to licensed and regulated lenders.
Colorado represents a possible trend in the payday lending industry of turning towards an installment loan product. The industry professionals at the Payday Advance Forum have predicted this for some time, and in a soon to be released Payday Loan Business Manual they discuss the possibly evolution of Payday Loans into an Installment Loan business.
Because the demand for access to credit speaks volumes and has not decreased, responsible and licensed direct lenders such as Payday Loan Trust will make the necessary adjustments to continue to provide their customers with access to credit when they need it. Only time will tell what financial product will meet the needs of lenders over the next decade.
According to a release on PRNewswire, it seems that payday lending is increasing online. The article refers to this phenomena as “Unintended Consequences” caused by over-regulating the local market.
Every state in the nation has its own laws and regulations on payday loans. Some are more restrict than others and in some cases, they are even illegal.
However the demand for payday loans and other short term loans haven’t gone away as many payday loan consumers tend to look elsewhere if payday loans are too hard to obtain in their own states. And one of those places is the internet where they can take a payday loan online.
Majority of online payday lenders often respect comply with each state law adjusting their fees and loan amounts according to that state law however there are some lenders, however it is hard to be 100% accurate since consumers can be dishonest on their application and since payday lenders usually don’t check credit history, there is a possibility they may end up funding the loan applications outside state rules.
If you like to find out more about your state laws on payday loans and payday lenders, we wrote a 2 part article back in May about the payday lending laws and regulations for each state; Payday Loan States part 1, part 2.
Important Disclaimer: Please be advised that the article was written back in May and there have been a lot changes in the state laws regarding the payday industry. Also our site is an informational and educational website and not designed for legal advises. Please seek legal counsel if you want to find most accurate information regarding payday lending laws and regulations in your state.
